Canada now has two major refundable tax credits that apply to clean technology companies: SR&ED and the Clean Technology Investment Tax Credit (Clean Tech ITC). They’re designed to do different things, but for companies building clean technology products, they often apply to the same project.
The question we get asked constantly: can you claim both? The short answer is yes. The longer answer is that the stacking rules matter, the timing matters, and getting it wrong can cost you hundreds of thousands of dollars.
What is the Clean Technology Investment Tax Credit?
The Clean Tech ITC is a refundable tax credit worth 30% of the cost of eligible clean technology property acquired and available for use after March 28, 2023. The 30% rate applies through 2033, then phases down to 15% in 2034 before expiring in 2035.
"Eligible clean technology property" is defined narrowly. This isn’t a credit for anything marketed as green. The eligible categories include:
- Electricity generation equipment using solar, wind, water, or geothermal energy
- Stationary electricity storage systems (batteries, flywheels, compressed air)
- Zero-emission vehicles and related charging infrastructure
- Heat pumps and certain ground-source heating/cooling systems
- Equipment used for producing hydrogen from electrolysis
- Certain small modular nuclear reactor equipment
The credit is refundable, meaning you get the cash even if you owe no taxes. For a $5 million equipment purchase, that’s $1.5 million back. It’s a straightforward capital incentive.
How does Clean Tech ITC interact with SR&ED?
Here’s the core distinction. SR&ED covers the R&D process: the labour, materials, and overhead associated with systematic investigation and experimental development. Clean Tech ITC covers the capital asset, meaning the equipment purchase itself.
Same project, different cost categories. A company developing a new battery storage system might spend $2 million on R&D (eligible for SR&ED) and then $5 million purchasing and installing the commercial equipment (eligible for Clean Tech ITC). Both credits apply, but to separate line items.
The rule is simple: you cannot claim the same expenditure under both credits. Equipment that’s claimed under Clean Tech ITC gets excluded from your SR&ED capital pool. R&D labour that’s claimed under SR&ED doesn’t factor into your Clean Tech ITC calculation. One dollar, one credit.
What about prototypes?
This is where companies trip up. A prototype built during R&D is an SR&ED expenditure. But if that prototype later becomes a commercial asset, staying in the facility and generating revenue, CRA may reclassify it. The guidance is evolving, but the safest approach is to clearly document whether each piece of equipment is a prototype for experimentation or a commercial asset for production. Don’t let the lines blur.
CCUS ITC: the other clean credit most companies miss
While everyone’s focused on Clean Tech ITC, the Carbon Capture, Utilization, and Storage credit is quietly one of the most generous incentives in Canadian tax history. The rates are staggering:
- 60% for direct air capture equipment
- 50% for other carbon capture equipment
- 37.5% for carbon transportation and storage
- 37.5% for carbon use in eligible industrial processes
CCUS applies to a narrower set of companies, primarily those in oil and gas, heavy industry, concrete, and chemicals. But the dollar values are enormous. A $20 million direct air capture installation would generate a $12 million refundable credit. And yes, CCUS stacks with SR&ED on the same project, using the same one-dollar-one-credit principle.
Common mistakes when claiming both credits
After reviewing hundreds of SR&ED claims alongside Clean Tech ITC filings, here are the mistakes we see most often:
- Double-dipping on equipment costs. The biggest one. Companies include capital equipment in their SR&ED claim that they’ve also claimed under Clean Tech ITC. CRA catches this in review and claws back the entire duplicate amount, plus interest.
- Misclassifying R&D labour as capital. Some companies try to capitalize R&D salaries into the cost of an asset to inflate the Clean Tech ITC claim. CRA’s policy is clear: labour associated with experimental development is an SR&ED expenditure, not part of the capital cost of property.
- Ignoring the timeline. SR&ED claims have an 18-month filing deadline from the end of the tax year. Clean Tech ITC claims attach to the year the property becomes "available for use." These timelines often don’t line up. Plan ahead or you’ll miss one.
- Not documenting the split. You need contemporaneous records showing which costs went to which credit. After the fact, it’s hard to reconstruct, and CRA auditors know it.
Planning your 2026 tax credit strategy
If your company is doing both R&D and capital investment in clean technology, the combined value of SR&ED + Clean Tech ITC + CCUS (where applicable) can return 40–60 cents on every dollar spent. That’s not a typo.
But capturing that value requires planning before the spending happens, not at tax time. You need to know which expenditures go where, how to document the split, and how the filing timelines align with your fiscal year.
We help companies structure their R&D and capital programs so every eligible dollar lands in the right credit bucket. No overlap, no gaps, no surprises at audit. Here’s what that looks like in practice.
